Northern Data AG, a prominent software company based in Frankfurt, Germany, is on the cusp of a significant business transformation. The company is reportedly nearing a deal to sell its cryptocurrency mining operations, as revealed in a recent Bloomberg report. This strategic move comes as Northern Data aims to leverage the momentum from the recent Bitcoin rally in November to realign its business focus.
Northern Data to Expand Its AI Business
Backed by Tether Holdings Ltd., Northern Data is channeling its efforts towards expanding its artificial intelligence (AI) services. This shift aligns with a broader industry trend where many crypto miners are pivoting to AI following a Bitcoin software update in April that halved their primary revenue stream. Elliot Jordan, the company’s Chief Financial Officer, shared that Northern Data has engaged bankers and is actively entertaining proposals from potential buyers. “The process is ongoing and has reached an advanced stage with several offers on the table,” Jordan mentioned during a presentation at the Deutsches Eigenkapitalforum.
While Northern Data has not attached a specific valuation to its crypto mining business, estimates suggest a value between $300 million to $500 million, predating the Bitcoin rally. Jordan highlighted, “It’s an opportune moment to sell this position,” addressing investors with optimism. Industry analyst Tim Wunderlich from Hauck Aufhaeuser Lampe Privatbank AG projects that the divestment could yield up to $800 million, assuming peer valuations of $100 million per exahash operations per second hold true.
In a parallel development, Northern Data’s mining division announced a partnership in May with Penguin Infrastructure Holding to enhance its mining capacity by 28 megawatts, aimed at increasing its hash rate. “We currently mine 7.9 exahash, representing just under 1% of the total Bitcoin mining capacity,” Jordan elaborated, underscoring the company’s significant footprint in the mining sector.
The Transition from Miners to AI
In a strategic decision made in October, Northern Data decided to sell its crypto mining business to focus more intensely on its burgeoning AI solutions segment. This transition is a response to market dynamics where Bitcoin miners have faced diminishing returns due to reduced block rewards since the halving in April. August 2024 was particularly challenging for miners, marked by lower transaction fees and a decreased hashrate.
To navigate these challenges, several miners are diversifying into AI platforms, which also demand substantial computing power. This pivot has proven financially beneficial for some. A report from JPMorgan in June highlighted that Core Scientific’s agreement to host 200 megawatts of GPUs for Coreweave resulted in a $4 billion surge in the combined market capitalization of approximately 14 Bitcoin mining companies.
Tether’s Commodities Liquidity Pool Could Hit $5 Billion
In related news, Tether’s CEO Paolo Ardoino has announced ambitious growth targets for Tether Investment’s liquidity pool, dedicated to financing raw material transactions. By 2026, the pool could expand to between $3 billion and $5 billion. Tether Investments plans to provide capital to commodities brokers, earning interest through temporary financing agreements.
Ardoino emphasized the strategic value of this initiative, noting that it addresses the constant liquidity demand in the commodities sector. He stated that Tether Investments is already collaborating with some of the largest commodities traders, who are drawn to using USDT for its transparency and transaction speed. This move is poised to enhance liquidity and foster greater integration of digital assets in commodity trading.
